China Said To Favour Yuan Bond Market In Hong Kong

by Mary Swire, Tax-News.com, Hong Kong

16 July 2004

According to a report in business daily The Standard, the Chinese government is actively considering a proposal to establish a market for trading yuan denominated bonds in Hong Kong.

At present, the yuan remains tightly controlled by the Chinese authorities and is not yet a fully convertible currency.

However, sources within China’s government have revealed that plans are being considered which will govern the sale and trading of yuan denominated bonds within the SAR, The Standard reports.

The plan is thought to be central to China’s need to raise capital and establish the Hong Kong bond market as the premier regional bond market, eventually superseding Tokyo.

However, many in Hong Kong’s financial community have pointed out some serious potential pitfalls to the idea of a yuan denominated bond market, chiefly the fact that the currency remains non-convertible, which will complicate the settlement and clearing process of bond trades undertaken in the SAR.

Therefore, unless the restrictions are eased, it is likely to be a considerable time before yuan bond trading can take root.

Recommended